If you don’t know about VATMOSS but you want to support an entrepreneurial economy. You should read and sign this petition if you agree.
If you don’t know about VATMOSS and want to get a sense of why entrepreneurs, particularly small software businesses and side project/home businesses, think this is a very, very dumb idea, in a very measured way. Read this by Rachel Andrew, pretty much a perfect example of a smart, savvy, thoughtful, ‘side-business’ entrepreneur.
If you don’t know about VATMOSS and you are a little bit uncomfortable with the notion that huge companies like Amazon with an army of accountants at their beck and call will probably end up benefiting the money movers and the offshore company structures they create. It is the platforms like Amazon that ironically will end up benefiting from this as they will be the only way that a micro business can possibly navigate the complexities and vagaries of VAT law in different EU Countries and stay within the law, thus forcing microbusinesses to share their revenue with Amazon who seem to make lots of money without making a profit so they don’t need to pay taxes.
If you want to see an organisation that has ABSOLUTELY NO CLUE what microbusinesses are and how they operate, follow HMRC on Twitter.
You can also watch their evolving pronouncements on how this will effect small businesses over there too.
This is an organisation that thinks all small businesses selling digital products across the world use ‘industrial strength’ ecommerce systems that can cope with this stuff already. This is an organisation that has also said it would run an 90 minute Twitter webinar to sort all the questions SMEs and Microbusinesses out there between the hours of 3.30pm-5pm on Thursday 27th November. (Let’s hope you are not actually, picking your children up from school and giving them their tea, have an appointment with a customer/doctor/relative be working in another job/whatever at that time). Proper businesses wouldn’t do that.
Be careful if you take the advice though!
I wouldn’t take too much of their advice too seriously though as in the past few days they have suggested that solutions to the issue include:
- Not selling to foreign countries where you are not clear of the VAT regulations.
- Registering for VAT in any country you sell something. (So if you sell a single item to a consumer in a country with a zero VAT registration threshold, you have to register for VAT in that country and submit quarterly tax returns. (You can of course just register for the VATMOSS VATMESS and submit regular VAT returns to HMRC who will manage other payments to other countries for you assuming all of your paperwork and documentation is correct. Oh, and of course you then need to charge VAT at 20% to every customer you sell to in the UK).
(There is some speculation on social media that HMRC is even suggesting that if customers want to sell to EU, they should set up two companies one in the UK and one outside to do so. Apart from the stupidity of a double admin overhead, there is suggestion that this is something HMRC would consider as tax evasion in other circumstances. I don’t know if this is entirely true but I am not going to take professional advice to find out as I don’t have to. If you are in that situation you need to speak to your accountant. Accountants are great but they love complexity like this as it means they get to sell more advice even if it is a painful process for them).
So selfishly, why should I care?
We are VAT registered already, we sell to businesses, have accountants etc so why should we care? Two reasons.
- One, this is an unseemly mess of a piece of badly implemented legislation that just goes to show that despite all the pronouncements from government about enterprise, entrepreneurship, industry leadership, innovation, empowerment, supporting an entrepreneurial economy, it shows that the government doesn’t actually really care, or understand what this segment of the market is about. That is just another in a list of disappointing actions from successive governments that does the opposite of what it is supposed to do.
- Two, (most selfishly and THEREFORE MOST IMPORTANT TO ME). This potentially stops people developing themselves in ways that help the rest of the economy.
What do I mean by that? We’re looking to fill two posts at the moment. A PA/Office Manager and a Digital Marketing
Ninja Professional. We have had over 200 applications for the posts. We noticed one thing that a lot of the strongest looking potential candidates had that made them stand out from the crowd was a side business. A hobby business. Even a hobby that has the potential to make a little money – a novelist in their spare time who writes and sells their own ebooks on their own website.
Something that doesn’t take much time but keeps them interested in things, learning new ideas. Not necessarily something huge, quite the reverse. Something that keeps people interested, sharp, gives them a spirit of entrepreneurship that you would never get in a person that has not had those experiences. Not something that is going to become so big that the person has to go and do it full time.
Someone who makes £400 a year as a side project selling ebooks or sells access to some interesting online niche content making a £5,000 is doing what the government wants them to do, get off their backsides and be entrepreneurial. Turning these sorts of businesses into ‘larger’ businesses with significantly more admin will mean that some of these people will stop doing that thing they love. Some will have to stop selling to people who want to buy things from them because they don’t know whether they are going to get in trouble with HMRC (one of the most stressful issues for small businesses for many people is the hassle of admin overhead and fear of being in breach of HMRC regulations, however unintentionally.